Another Finance Question.....subsidised residuals?

[T2R31]

Chaps,

Briefly....

This world of car finance is a new one to me......

Porsche subsidised residuals - do they work financially?

I'm trying to decide whether to look at a PCP, HP with a balloon or buying outright (spending so much cash upfront makes me shudder).

I suspect that I'll end up buying the car in the early part of the term.

From what I think that I've gleaned, HP on £40k with cost me around £5k over a 4 year term. PCP just seems to confuse matters as Porsche offer 60% residuals but the overall costs seem seem substantially higher.

How do finance companies generally calculate future balloon figures? CAP?


Thanks

[markiii]

if you have the cash use it

better saving the fnance interest than paying tax on the pitiful interest sticking it in the bank will generate

[anonymous-user]

It might make you shudder, but buying outright is the cheapest possible way to buy the car.

[shortlad]

Depends on where the cash is coming from.

My accountant always says to me about business cars/money to put the minimum in up front as cash is king especially in these 'interesting times'. Of course if it's personal savings it's more up to you whether you want to sink a chunk into a car and save in the long-term.

I lease a Nissan Juke (yes I know it's a weird choice but it's cheap) and I have a baloon finance on my 996tt. I put in a deposite that should I need to get out of it quickly I could sell it to the trade and be able to cover the outstanding finance. This has a baloon after 4 years.

If you want some advice and a source of finance contact Jamie Garside who specialises in this type of finance. He advertises on 911uk.org (if you need a number let me know). He's a top guy and made my purchase easy and I was happy with my deal.

[anonymous-user]

shortlad said:

Depends on where the cash is coming from.

My accountant always says to me about business cars/money to put the minimum in up front as cash is king especially in these 'interesting times'.

Different accountants have different ideas. My accountant (who also happens to be my wife) thinks car finance is a rip-off and avoids it like the plague. But obviously not many people have £40K sitting doing nothing in their bank account. I certainly wouldn't put every last penny of my savings into a depreciating car, but I certainly wouldn't finance one with a minimum deposit either. As long as you remember that finance costs money in the long run, it's not a problem.

[shortlad]

uktrailmonster said:

Different accountants have different ideas. My accountant (who also happens to be my wife) thinks car finance is a rip-off and avoids it like the plague. But obviously not many people have £40K sitting doing nothing in their bank account. I certainly wouldn't put every last penny of my savings into a depreciating car, but I certainly wouldn't finance one with a minimum deposit either. As long as you remember that finance costs money in the long run, it's not a problem.

The bad thing about 99.5% of cars is that they cost us a lot of money, finance is just 1 part of it, depreciation being another.

With finance you have to consider whether you feel the interest rate is reasonable. I have a reasonable credit rating so it's not too bad but my bank offered me the money for the 911 at 16%!! Can't understand why he looked surprised when I said on ya bike.

Most of us have to use finance to be able to buy these cars and there are those that would say don't buy what you don't have the money for but then there are people that say you're only here once and do stuff that's affordable and live a little. It was said to someone I know who's dad had said it admitting he had regrets and left it too late. A sad story.

I certainly know people who never have any finance (I mean none at all!) but then they have different lives with different responsibilities and don't like cars like some of us do.

I try to look at the biggest cost connected with a car, depreciation. I lost approx £1700 in 4 years with my Tuscan but I did spend money on it during the ownership on things like updated shocks, brakes, tyres, etc. I feel that is reasonable. Now look at what you can get a 2003 996tt for and look at what it cost new 8 years ago and you realise it's lost 2/3's of it value. It would have to be worth approx £10k in 4 years for me to loose 2/3's which I very much doubt it will. So where am I going with this? I would have to be minted to have bought and lost that much on my 996tt when it was new compared to what I will loose in terms of interest on finance and depreciation. And add to that I will have 4 fun and fantastic years with the car.

I think it's more a case of looking at the right value to buy at rater than looking at interest alone as there is more to ownership than interest.

Something like this (I drove a similar car) was £31k 6 months ago. If I had got that the interest would be the lesser cost for me.
http://www.pistonheads.com/sales/3342179.htm

Now cosider this...
http://www.pistonheads.com/sales/3347852.htm
I bought mine privately and considering most dealers would have £5k on top of what they would give you trade I'm still happy with what I decided to buy.

I'm certainly better off than if I had bought a 997C2S.

All of this is my opinion but the last 2 cars I've had I've applied this theory to and 81/2 years down the line and onto my 3rd 'garage' car I'm still happy with what it costs me.

I hope this makes sense and isn't just me ramling

Edited by shortlad on Friday 9th December 14:04

[kbf1981]

uktrailmonster said:

It might make you shudder, but buying outright is the cheapest possible way to buy the car.

This is just not true.

Manufacturers often use PCT schemes and Leasing schemes to make cars cheaper without playing with the sticker price. For example BMW used to offer M3's at £499 per month on 24 month leasing contracts. On what planet can you buy a brand new M3 at £50 and only lose £12k in 2yrs on it?

You can't. They were looking for a way to give a discount that wouldn't kill used values, so took it on the chin with their finance.

Porsche do the same thing from time to time. Mercedes definately do. Have you seem what an SLS costs on finance? It's miles cheaper than a cash purchase:

http://www2.mercedes-benz.co.uk/content/unitedking...

[AdYa]

kbf1981 said:

uktrailmonster said:

It might make you shudder, but buying outright is the cheapest possible way to buy the car.

This is just not true.

Manufacturers often use PCT schemes and Leasing schemes to make cars cheaper without playing with the sticker price. For example BMW used to offer M3's at £499 per month on 24 month leasing contracts. On what planet can you buy a brand new M3 at £50 and only lose £12k in 2yrs on it?

You can't. They were looking for a way to give a discount that wouldn't kill used values, so took it on the chin with their finance.

Porsche do the same thing from time to time. Mercedes definately do. Have you seem what an SLS costs on finance? It's miles cheaper than a cash purchase:

http://www2.mercedes-benz.co.uk/content/unitedking...

I thought that the M3 deal was not available to private buyers?

The dealers tend to offer better deals to people buying with finance as they also profit from the finace deals. So why not take finance and then pay it back within the first month? Could that work out cheaper?

[anonymous-user]

kbf1981 said:

This is just not true.

Sure, not in all cases and there have been plenty of 0% finance deals around over the years. But generally speaking you get spanked by finance deals. Some of the threads on this forum have illustrated this quite well.

[kbf1981]

uktrailmonster said:

kbf1981 said:

This is just not true.

Sure, not in all cases and there have been plenty of 0% finance deals around over the years. But generally speaking you get spanked by finance deals. Some of the threads on this forum have illustrated this quite well.

It takes weighing up the offer, on a deal by deal basis. Some people will sign up to rediculous deals, some people will find good ones. Personally I remember being offered 12% APR on a Ford Focus ST many, many years ago....and being shocked the dealer thought I was that stupid.

However, I've equally had better deals on some more recent finance stuff than you'd get for cash, and if you own a business, it's well worth taking advantage of that because you're getting miles more than 7% return on your own cash in stock.

Worth noting that the way manufacturer finance schemes work is *seperate* to dealer margin.

Dealer buys car at £50k - sells it for £60k list, so they've got £10k "front margin".
Dealer sells XXX number of cars, they get a back end margin bonus.
Manufacturer normally makes a profit on selling finance, so normally might buy cash at 4%, sell at 8%.....BUT....if they're looking to shift stock, they can't play with retail prices like a normal company would. If you're Tesco and you want to sell more milk, you slash it to 20p a litre and it goes. Do that with a 911 and no one who presently owns one (and loses a fortune in depreciation) will ever, ever buy one again....so they simply offer "cheap" finance - costs them 4%, they give it you at 4% etc...and the discount is paid for by the margin in their cars when sold to the dealer.

This is why you can often get a better deal using manufacturer finance schemes than via cash.

Obviously it's not always the case, but it is pretty common. That SLS example above (and ANY offer you can now get on an AMG Merc), are the same.

Re: M3 deals....to make it personal, they just charge VAT. That's it. Anyone could have it. M3's are still pretty cheap on finance.

[SFO]

kbf1981 said:

Mercedes definately do. Have you seem what an SLS costs on finance? It's miles cheaper than a cash purchase:

http://www2.mercedes-benz.co.uk/content/unitedking...

that's still around £63k over 2 years!

[matc]

SFO said:

kbf1981 said:

Mercedes definately do. Have you seem what an SLS costs on finance? It's miles cheaper than a cash purchase:

http://www2.mercedes-benz.co.uk/content/unitedking...

that's still around £63k over 2 years!

Which is pretty much what you would lose in the first year in depreciation!

[shortlad]

SFO said:

kbf1981 said:

Mercedes definately do. Have you seem what an SLS costs on finance? It's miles cheaper than a cash purchase:

http://www2.mercedes-benz.co.uk/content/unitedking...

that's still around £63k over 2 years!

Question is.... why do people worry about finance interest when the deprecation is like this?

[The Stiglet]

shortlad said:

Depends on where the cash is coming from.

My accountant always says to me about business cars/money to put the minimum in up front as cash is king especially in these 'interesting times'. Of course if it's personal savings it's more up to you whether you want to sink a chunk into a car and save in the long-term.

I lease a Nissan Juke (yes I know it's a weird choice but it's cheap) and I have a baloon finance on my 996tt. I put in a deposite that should I need to get out of it quickly I could sell it to the trade and be able to cover the outstanding finance. This has a baloon after 4 years.

If you want some advice and a source of finance contact Jamie Garside who specialises in this type of finance. He advertises on 911uk.org (if you need a number let me know). He's a top guy and made my purchase easy and I was happy with my deal.

Not prying into your personal details but I'm reading that you could arrange finance for 48 months on a car in excess of 10 years old at the end of the term? Was that easy or did you struggle to do that?

Cheers

[anonymous-user]

The company I used offered both 3 & 4 yr deals on my 10yr old car.

[anonymous-user]

kbf1981 said:

This is just not true.

Manufacturers often use PCT schemes and Leasing schemes to make cars cheaper without playing with the sticker price. For example BMW used to offer M3's at £499 per month on 24 month leasing contracts. On what planet can you buy a brand new M3 at £50 and only lose £12k in 2yrs on it?

You can't. They were looking for a way to give a discount that wouldn't kill used values, so took it on the chin with their finance.

Porsche do the same thing from time to time. Mercedes definately do. Have you seem what an SLS costs on finance? It's miles cheaper than a cash purchase:

http://www2.mercedes-benz.co.uk/content/unitedking...

Does anyone seriously pay anywhere near list for a SLS ? Aston are giving tens of thousands (up to 50k on pre-reg example according to one ph thread). Merc must be doing the same given the nearly new prices of these.

Edited by drmark on Tuesday 13th December 20:00

Edited by drmark on Tuesday 13th December 20:02

[kel176506]

Would the OP mind disclosing the figures, deposit and term durations involved with the finance deal your looking into. I'm not looking to pry into your personal finances but i'm always drawn too finance because i like the idea of not having to part with the majority of the cash, leaving me with a better looking bank balance and getting the car i want.

I am a bit baffled by the PCP etc in terms of what that all means 60% residuals etc and would love to here it explained.

I have always thought that the worst part of any car ownership is depreciation, i have never really kept a car much longer than 9-12 months another reason why car finance seams to appeal to me, i never get near to the balloon payment.

[Xstyle]

shortlad said:

If you want some advice and a source of finance contact Jamie Garside who specialises in this type of finance. He advertises on 911uk.org (if you need a number let me know). He's a top guy and made my purchase easy and I was happy with my deal.

Please send me the details of Jamie Garside. What rate did he get for you on the APR?
Thanks

Edit: found him here :
http://www.performancecarfinance.co.uk/consumers.a...

A mobile number would be handy though

Edited by Xstyle on Tuesday 13th December 21:59

[T2R31]

Jamie has just emailed across some figures to me, which are pretty reasonable.

Conclusions that I've drawn so far:

- New car discounts are currently quite respectable, think around 10%
- On slightly older cars (12 months+), I'm struggling to make the numbers.

PCP APR terms on new car are around the 9.5% mark, with good residuals.
Lease/balloon offers better APR figures (8%) - with lower residuals (substantially)

BUT - the balloon higher balloon figures on a new car are negated by the head of the new car depreciation curve.

In real terms, if you buy new and go Porsche PCP then it costs you....heavily......depreciation, higher balloon and higher rates - monthly payments don't really shine through with any benefit.

It is tempting to look at a new 61 plate with heavy discount - but, overall costs over 36 months are likely to you £20k down with no car!

My math is suggesting 12 month old car, lease/balloon from a performance car finance offering with low balloon (the balloons (non-guaranteed) are suggesting that there should be approx £10k surplus equity between market value and balloon figure.

[Xstyle]

What about a deposit and then straight HP, with no balloon?
I was offered this route via an Indy dealer and it seemed to be much better overall, with a flat rate of just over 3%.
Pity they sold the car I was going up for... but it opened my eyes to other financial routes.

I will call Jamie later, looking to buy a car that is c. 6/7 years old.
Depreciation has hit, but I know it hasn't stopped, but hopefully slowed a lil...